Question

Which taxation type is characterized by the allocation of business income and separately reported items to the owners according to their share in the business, receiving an schedule K-1 for their portion?

a) Separate entity, but does not pay tax
b) Most income and expense are aggregated in computing the ordinary business income (loss)
c) Business income (loss) and separately reported items are allocated to the owners according to their share in the business and receive a schedule K-1 for their allocated portion
d) Each owner reports their allocated portion on their individual tax return

Answer 1

option c) Business income (loss) and separately reported items are allocated to the owners according to their share in the business and receive a schedule K-1 for their allocated portion.

Step-by-step explanation:

The taxation type that is characterized by the allocation of business income and separately reported items to the owners according to their share in the business, receiving a schedule K-1 for their portion is option c) Business income (loss) and separately reported items are allocated to the owners according to their share in the business and receive a schedule K-1 for their allocated portion.

In this type of taxation, each owner reports their allocated portion on their individual tax return. This is common in partnerships and certain types of corporations where the income and expenses flow through to the owners or shareholders.

For example, if three individuals own a business and one owns 60% while the other two each own 20%, the business income and losses would be allocated accordingly, and each owner would receive a schedule K-1 form to report their share of the business income or loss on their individual tax return.